National Express happy to ride solo but Stagecoach remains on radar
National Express (NEX.L) does not necessarily need to buy rival Stagecoach (SGC.L) to boost revenue and profit, although it is still considering its options after it was outbid by a new suitor this week, the transport company said on Thursday.
National Express’ attempt to buy Stagecoach, Britain’s biggest bus and coach operator, hit a setback on Wednesday after a European fund trumped its 445 million pound ($585 million) all-stock offer with a higher, potentially more attractive cash-only proposal, which was welcomed by Stagecoach.
“As a diligent board we consider our options, but I have to say that unlike our competitor we are a very well diversified business,” National Express Chief Executive Ignacio Garat said in an interview.
“We don’t need this deal to deliver outstanding growth in revenue, profit and free cash flow.”
Garat’s remarks came after National Express announced plans to resume dividend payouts in 2022 as it forecast annual revenue to inch closer to pre-pandemic levels as travel recovers.
British bus companies are still receiving government aid ahead of a fuller recovery from COVID-19. They are now navigating higher fuel prices because of the Russia-Ukraine crisis.
National Express, which operates in eight countries across Europe and North America, said the fallout from the war in Ukraine will likely be limited as it has hedged itself fully against any price increases for 2022.
National Express has turned off automatic renewals for its fuel price hedging mechanisms, instead choosing to recalibrate for the next quarter, Chief Financial Officer Chris Davies said. It will decide its 2023 and 2024 hedging strategy on April 1.
“When you’re in the middle of a geopolitical conflict like the one we’re in, we don’t want to just auto-hedge,” Davies said.
The group is roughly 65% hedged for 2023 at an average price of 34.4 pence per litre of fuel and around 25% hedged for 2024 at 38.5 pence.
The Birmingham-based company reported an underlying pretax profit of 39.7 million pounds for 2021, compared with a loss a year earlier.
($1 = 0.7604 pounds)